#1 Trader Know Thyself
The first step in a trader’s journey is to do some self reflection and learn their strengths and weaknesses—both internal and external.
Do you love the action of day trading or would you prefer holding positions for long period of times letting a trade play out? You must pick a style that fits your personality, position trading, trend following, option plays,day trading, growth investing, CAN SLIM, momentum trading, break out trading, chart pattern recognition, or the Darvas method.
#2 Pick a market
Will you trade stocks, options, futures, commodities, bonds, or currencies?
#3 How aggressive will you be?
Understanding your level of risk correlates to your level of returns. How much will you risk per trade? Do you have a large portfolio and want to risk a conservative 1% of capital pr trade? 2%? Will you be aggressive and risk 3% or more per trade? Are you willing to go all in on trades with some speculative money, understanding that big bets can cause you to lose your whole account? Do you want to make 15%, 25%, or 50% a year? Are you willing to take the draw downs associated with that level of risk?
#4 Doing the work
Do you understand that trading is a profession like any other that requires the same level of reading, studying, and learning as any other. Like other professions, you will not make money in the beginning. When you first start out, you will have to invest time, education, and losses of capital. Trading is the hardest, easy money you will ever make. If you want to trade, you will be required to study charts, read books, get coaching, have a mentor, do research, and attend educational seminars.
#5 Learn to lose
You must learn to accept that you will be wrong about half the time. While traders will have streaks when they are right 10 or 20 times in a row, they will sometimes be wrong 10 times in a row. Few other professions make as much concession for losing, other than entrepreneurs and professional gamblers. Trading is a lot like baseball; your runs batted in and home runs off-set your strike outs.
#6 Master YOUR method
In trading it is more important to be a master of your method, than a jack of all trades and master of none. You need a winning method that you can trade with confidence.
#7 Trading environment
Half of your success will be determined by knowing what kind of trading environment you are in. Bull market, bear market, volatile, or range bound. Also the instruments you use to execute your trading will determine your success. Your market has to fit your style. Trend traders can’t trade a flat blue chip stock, and most swing traders can’t successfully trade a strongly trending currency.
